Saudi leads decline in Gulf bourses on growth worries

Stock markets in the Gulf registered steep losses on Sunday, as investors worried that tighter monetary policy by inflation-fighting central banks could damage economic growth.

On Wednesday, the US central bank approved its biggest interest rate hike since 1994, lifting the target federal funds rate by 75 basis points to a range of between 1.5 per cent and 1.75 per cent. Fed officials also see further steady rises this year, targeting a federal funds rate of 3.4 per cent by the year-end.

Saudi Arabia’s benchmark index slid 4.4 per cent, its biggest intraday fall since November 2021, as stocks fell across the board including oil behemoth Saudi Aramco, which retreated four per cent.

Oil prices, a key catalyst for the Gulf’s financial markets, tumbled about six per cent to a four-week low on Friday on worries that interest rate hikes by major central banks could slow the global economy and cut demand for energy.

The Saudi Central Bank said on Wednesday it increased its key interest rates by 50 basis points moving in tandem with the US Federal Reserve’s hike.

The Saudi Central Bank, also known as Sama, lifted its repo and reverse repo rates by 50bps to 2.25 per cent and 1.75 per cent, respectively. The Saudi riyal is pegged to the dollar.

The Qatari index declined 3.5 per cent, as all the stocks on the index were in negative territory.

According to Alayyaf international investors continued to withdraw and the bourse could see more selling pressure as investors shift away from risk. — Reuters